Philadelphia Regional Office...participant deferrals in a timely fashion for 8 payrolls in 2012 and...

8/5/2014

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Employee Benefits

Security Administration

Voluntary Fiduciary Correction Program

Workshop

for Late Participant Deferrals and Loan Repayments

Philadelphia Regional Office

Voluntary Fiduciary Correction Program

Welcome

Mike Horton

Associate Regional Director

Employee Benefits Security Administration

Philadelphia Region

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Solely opinion of presenter

Disclaimer

Philadelphia Region’s

VFCP procedure

Cannot be recorded or disseminated

without written approval

Philadelphia Region

Pennsylvania

Southern New Jersey

Delaware

Maryland

Washington, DC

Virginia

West Virginia

Streamline the

VFCP process

In this region only

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Outside Philadelphia Region

dol.gov/ebsa

EBSA Hotline

866-444-EBSA (3272)

Late contributions of

Focus of Workshop

participant

deferrals and/or loan repayments

into a

pension plan

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Participant deferrals

vs

Participant contributions

Terms

Agenda

Q&A: [email protected]

“Best practice” application

VFC program overview

EBSA background

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EBSA Overview

Vigorously enforcing

ERISA Title I

Regain compliance

with ERISA

VFC Program Overview

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Participant Advantage:

VFC Program Overview

Restoration of deferrals

Lost earnings

Regain ERISA compliance

DOL “no action” letter

Fiduciary Advantages

Avoid 20% penalty

Possible: avoid IRS excise tax

No VFCP application fee

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VFCP Process

Voluntary program

No need to consult EBSA

Submit application after correction

VFCP applicant

Successful: “no action letter”

VFCP Process

Workshop Goal:

Streamline the VFCP process

to increase your probability

of a successful application

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VFC Program Limits

Investigate truthfulness and completeness

Confirm correction occurred

Refer criminal information to appropriate agency

Take other actions under special circumstances

EBSA reserves the right to:

VFC Program Relief

DOL “no action” letter

Limited - specific transaction

Conditioned - truthfulness

Does not limit other parties’ rights

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VFCP Eligibility

Not under investigation

No criminal violations

1 of 19 transactions

Multiple transactions – same type(e.g., late deferrals over many pay periods)

VFCP General Rules

Multiple types – single application(e.g., late deferrals and improper expenses)

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VFCP General Rules

Plan cannot pay for correction

Losses and earnings restored

Form 5500 amended as needed

Excise tax resolved

Reasonable assumptions

Workshop Spreadsheet

Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

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Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

AGGREGATE deferrals

and loan repayments

Loss

Date

Date deferrals and

loan repayments

SHOULD HAVE

BEEN

contributed to the

plan

8/19/13


Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

11/15/13

Date late

deferrals

credited into the

plan

(ON or BEFORE)

Date lost

earnings WILL

BE credited into

the plan

(ON or BEFORE)


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Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

Assume today’s date is 8/30/13

9/30/13

“On or Before” example

1 month in the future: 8/30/13 to 9/30/13


Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

11/15/13

Lost

Earnings


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VFCP Online Calculator

“VFCP Calculator” in a web search engine

dol.gov/ebsa

under the “compliance assistance” tab

http://askebsa.dol.gov/vfcpcalculator/webcalculator.aspx

Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

11/15/13

Lost

Earnings

10000


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Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

11/15/13

Lost

Earnings

10000

08 19 2013


Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

11/15/13

Lost

Earnings

10000

08 19 2013

09 30 2013


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Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

11/15/13

Lost

Earnings

10000

08 19 2013

09 30 2013

11 15 2013


Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

11/15/13

Lost

Earnings

10000

08 19 2013

09 30 2013

11 15 2013


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Payroll

Period

8/1/13 –

8/14/13

Pay

Date

8/19/13

Principal

$10,000

Loss

Date

8/19/13

Recovery

Date

9/30/13

Final

Payment

11/15/13

Lost

Earnings

8/15/13 –

8/29/139/2/13 $15,000 9/2/13 10/30/13 11/15/13 $71.77

$34.71

$25,000 $106.48

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Attachments

Model VFCP ApplicationWorkshop SpreadsheetVFCP Online Calculator

Deferral amounts

Principal deposit

Lost earnings deposit

Excise tax

Deferral and Loan Repayment Proof

Payroll Report

Aggregate amounts

Match pay period and pay date

Highlight

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Principal Deposit Proof

Plan Asset Report

Shows receipt into plan account

On or before the recovery date used

in the Workshop Spreadsheet and

VFCP Calculator

Lost Earnings Deposit Proof

Plan Asset Report

Shows receipt INTO plan account

On or before the Final Payment Date

used in the Workshop Spreadsheet

and VFCP Calculator

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Proof – General Considerations

Spreadsheet is NOT proof

Aggregate level NOT participant level

No personally identifiable information

Must match Workshop Spreadsheet

Commingled funds = additional proof

Highlight ONLY Workshop Spreadsheet numbers

Contact me if unable to provide requested proof

Excise Tax - Overview

Late deferrals = prohibited transaction

Prohibited transaction = excise tax

NOT paid for by plan participants

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Excise Tax - Options

Provide participant notice

Pay excise tax to plan

Pay excise tax to IRS

Excise Tax – PTE 2002-51 Relief

Eligibility

NOT late more than 180 days

NOT taken advantage of this

exemption for a similar transaction

in last 3 years

If excise tax is $100 or less

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Excise Tax – PTE 2002-51 Relief

Provide participant notice

Pay excise tax to plan

-or-

May choose to:

Excise Tax – Participant Notice

Within 60 days of VFCP application

Seeking VFCP and PTE 2002-51 relief

Describe error and correction

30 days to make comments to EBSA

Provide EBSA regional office contact info

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Excise Tax – Participant Notice

Include copy in VFCP application

Effective only upon “no action” letter

Excise Tax – Paid to Plan

Alternatively

Tax $100 or less

Calculate using IRS Form 5330

Copy of Form 5330 in VFCP Application

Add proof of deposit into plan

Effective only upon “no action” letter

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Excise Tax – Paid to IRS

All Others

Calculate using IRS Form 5330

Copy of Form 5330 in VFCP Application

Add proof of payment to IRS

Cancelled check or outgoing wire OK

Excise Tax – Consequences

Refer Plan to IRS

Not properly submitted with

VFCP Application

Even if we issue a “no action” letter

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Completing the

VFCP Application

VFCP Application

Applicants

All who need “no action” letter

Common Listing

Plan Sponsor

Third-Party Administrator

Trustee

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Transactions Corrected

Delinquent Participant

Contributions and Participant

Loan Repayments to Pension

Plans

One type of transaction per

application

Principal Amount and Date Paid

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Principal Amount and Date Paid

“Various – See Workshop Spreadsheet”

Lost Earnings and Date Paid

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Lost Earnings and Date Paid

Individuals Involved

Breach and correction

Include job title

Manager not entire department

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Explain the Breech

Sample Response

“The payroll department failed to remit

participant deferrals in a timely fashion for 8

payrolls in 2012 and 10 payrolls in 2013

due to a clerical and procedural oversight.

A total of 150 participants were affected.

The specific dates and amounts of each

occurrence are listed on the attached

VFCP Workshop spreadsheet.”

Explain the Correction

Sample Response

“Subsequent to the breach, the payroll

department deposited the late deferrals for

each payroll. The specific dates for each

deposit are also listed on the attached

VFCP Workshop spreadsheet.”

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Ongoing Delay Justification

Plan Official MUST Complete

Small Plans: <100 Participants

Deposit deferrals within 7 business days

State the number of days

“Relying on the safe harbor provided in

DOL Regulation 2510.3-102”

No further documentation needed



Large Plans: 100+ Participants

Deposit deferrals same day or next

business day

State the number of days

No further documentation needed

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Large Plans: >1 business day

Small Plans: >7 business days

Complete all parts of question 4 in detail

Must provide supporting documentation

VFCP application rejection is likely if a

significant case for the delay is not

proven.

Remittance Practices

Sample Response

“Prior to the correction, our procedure was

to remit deferrals at the end of each month.

Our current procedure is to remit them on

the business day following each pay date.”

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Lost Earnings Calculation

Check the Online Calculator box

Supplemental Information

Basic plan information

Authorized Representative

Someone other than a Plan Official

Plan Official authorizes on page 4

Point of Contact for inquiries

Add email address

Most recent 5500 information

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Excise Tax

Participant Notice

Include required proof

Excise Tax

Pay To Plan


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Excise Tax

Pay To IRS


Additional Information – Page 4

Proof of payment

Investigation disclosure

VFCP Referral box

Please indicate “VFCP Workshop”

Authorization of Preparer

designated on page 3

Signed by a Plan Official

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Penalty of Perjury

Plan Official

AND Authorized Representative

(when one is designated)

VFCP Checklist

Complete, sign, and date

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[email protected]

Questions?

Philadelphia Regional Office...participant deferrals in a timely fashion for 8 payrolls in 2012 and...

Documents

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